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Business Customers Seek Resilience During Historic California Wildfires

Oct 27, 2020

Guidehouse Insights

The microgrid industry keeps evolving. Costs for distributed energy resource options such as solar PV and energy storage are dropping while the sophistication of digital controls grows.

California Needs Microgrids

Nowhere is the need for microgrids more pressing than in California. The state faces a combination of wildfires, utility public safety power shut-offs (PSPSs), and carbon reduction mandates, which creates a need for innovation to bring much-needed resilience to underserved commercial and industrial (C&I) customers. While there are signs of hope emanating from the California Public Utilities Commission, the state needs to move quickly to prepare for 2021, given the lack of progress on the microgrid front in 2020. While there is little doubt utilities have a role to play in revitalizing aging grid infrastructure, history points to three key trends that should shape a future microgrid strategy in California. The following will help the state achieve the results required for a viable solution ecosystem:

  • Energy as a Service (EaaS): This key financial innovation, which spurred on growth in rooftop solar PV, is also a key driver for microgrids during the pandemic. The basic premise is that a solutions provider offers a microgrid with no capital expenses for the customer, operates the system, and guarantees performance outcomes. If evaluated by project number, it is now the most popular microgrid business model in the world, followed by owner financing, government funding, and utility rate-basing.

Microgrid Business Model Market Shares, World Markets: 3Q2020

EaaS Microgrids

(Source: Guidehouse Insights)

  • C&I: When Guidehouse Insights first started tracking the microgrid market 10 years ago, the C&I segment was the smallest. With a compound annual growth rate of 23.9%, it is anticipated to be the fastest growing segment in North America. The reason why is simple; these customers know the cost hardships of power outages. During 2019’s PSPS events in California, businesses realized they need better solutions than temporary backup diesel generators that faced emission limits on runtimes. Cost declines for more sustainable resiliency solutions make microgrids attractive for these C&I customers.
  • Modular Microgrids: The beauty of the microgrid is that it can be customized to meet the precise goals of any customer. Nevertheless, there is a growing movement within microgrid ranks to take a contrary approach to radically scale deployments quickly, as is needed in California. Such an alternative approach to the market can be summed up succinctly: make microgrids modular and scalable. This approach is more attractive to financiers as it creates portfolios of similar assets.
New Ventures Pair EaaS with Modular Microgrids

These three trends are behind the creation of GreenStruxure, the new venture by Schneider Electric and Huck Capital, to move the microgrid market forward in California (and in the Northeast.) Schneider Electric has already launched its AlphaStruxure joint venture with The Carlyle Group for larger, custom-tailored projects. GreenStruxure is focused on modular, standardized microgrids for medium-sized facilities in the 0.5 MW to 5 MW size range, which spend at least as $30,000/month on electricity. “Building owners and operators need to have confidence that safe, reliable, sustainable power will be there when they and their customers need it most,” said Mark Feasel, president of Schneider Electric's Smart Grid business. “The time to act is now if we’re going to be ready for next year’s fire season.”

Combining EaaS with modular microgrids optimized with cloud-based software for midsize C&I facilities sounds like a winning combination. Stay tuned to see if new offers can help the Golden State avoid the disappointments microgrid stakeholders experienced in 2020.